As the country starts to capitalise on its huge potential, and private and public investments strengthen its advantages as a destination, Tanzania’s tourism industry is expected to be among one of the world’s fastest-growing over the next decade, according to the World Travel & Tourism Council (WTTC).
With 1.28m tourist arrivals in 2016, Tanzania is already one of the most-visited destinations in sub-Saharan Africa, and attractions such as the Serengeti National Park and Zanzibar have an increasingly prominent global profile. Traditionally a high-end destination for more adventurous travellers, Tanzania has avoided mass-market overdevelopment, playing to strengths in nature and culture – a model that many emerging markets aspire to adopt. The government aims to attract 3m annual visitors by 2022, and is in the process of drawing up the first new national tourism strategy for nearly two decades, which is expected to include a new focus on high-value segments and infrastructure.
Major Contributor
Tourism and travel directly accounted for 4.7% of GDP in 2016, or TSh4.59trn ($2.1bn), according to the WTTC. Furthermore, the WTTC estimates the sector’s broader economic impact is considerably larger, taking into account indirect and induced activity (including spending by sector employees), totalling TSh13.1trn ($6bn), or 13.3% of GDP.
Tourism is also a significant export earner, with visitor exports generating TSh5.46trn ($2.5bn) in 2016, or 21.4% of the total, according to the WTTC, which defines exports as “spending within the country by international tourists for both business and leisure trips, including spending on transport”. Meanwhile, the sector attracted investment worth TSh2.66trn ($1.2bn) in 2016, or 8.7% of overall investment, a figure that is set to grow as new hotels and resorts open up.
The tourism and travel sector employed 470,500 people directly in 2016, with the total rising to 1.389m when those indirectly supported by the industry are added, accounting for 11.6% of the workforce. The sector’s contribution to job creation is very important in a country with high youth unemployment.
Tanzania’s appeal as a destination has remained robust, and visitor numbers tend to rebound fairly quickly following setbacks, such as the bombings of the US embassies in Dar es Salaam and Nairobi in 1998, post-election violence in Zanzibar in 2001 and more recent regional disease outbreaks. However, these have contributed to slowing growth over the long term. The knock-on effect of security problems in Kenya have also caused concern, despite Tanzania having fewer issues.
Growth Potential
The WTTC is bullish about the outlook for Tanzania’s tourism industry. It forecasts that arrivals will rise to 2.267m by 2027. The organisation estimates that the tourism and travel sector’s direct contribution to GDP will increase by 3.7% in 2017. The sector’s total contribution to GDP is expected to grow by 4.1% in 2017 – a fairly high rate given various headwinds. Total contribution will then rise to an annual average of 6.8% over the following 10 years – the seventh-highest rate in the world.
This growth is expected to generate an extra 728,000 jobs overall, 261,500 in the sector directly. Visitor export earnings are forecast to rise by 6.9% annually, and investment by 6.6% until 2027. Of course, these figures may be significantly higher if the government achieves its target of boosting arrivals to 3m by 2022.
Rising Arrivals
Tourist arrivals grew by 12.9% from 1.137m in 2015 to 1.284m in 2016, according to Jumanne Maghembe, then-minister of natural resources and tourism, speaking at the presentation of the ministry’s programme and budget for FY 2017/18. Maghembe said the sector contributed 17.5% to GDP and 25% to its foreign currency earnings.
The Tanzania National Parks Authority (TANAPA), responsible for the management of national parks, earned TSh173.2bn ($78.8m) from entry fees in 2016, and contributed TSh4.9bn ($2.2m) of its funds to tourism development. TANAPA expects its entrance fee revenue to rise by 18% in FY 2017/18 to TSh205.1bn ($93.3m) from an estimated 930,500 visitors, and to invest TSh25.3bn ($11.5m) in development schemes.
Meanwhile, the Ngorongoro Conservation Area Authority (NCAA), which has responsibility for the famous Ngorongoro Crater, a vast and beautiful volcanic basin, collected TSh81.8bn ($37.2m) from 487,840 tourists visiting the area. The authority expects visitor numbers in the basin to break the half-million barrier easily in 2017/18, with a projected total of 631,520, generating TSh88.3bn ($40.2m) in revenues.
“We saw significant growth in 2016 both at the top end of the market and in budget tourism,” Julian Edmunds, former managing director of Coastal Aviation, a Dar es Salaam-based charter airline, told OBG. “Investment has grown – people are investing in quality hotels and lodges, vehicles and aircraft. Increasing investments have helped boost visitor numbers as options have expanded and new openings have raised Tanzania’s profile. The Serengeti National Park had just six lodges 20 years ago, now there are many more.”
Source Markets
In his presentation of the FY 2017/18 programme and budget in May 2017 Maghembe said that the ministry would put an emphasis on promotion of Tanzania not only in its core tourism markets – such as the US, the UK, France, Germany and Italy – but also in emerging tourism markets, including China, Russia and Israel, which comprise an increasingly important source of business for Tanzania.
The Ministry of Natural Resources and Tourism (MNRT) has designed specific promotional strategies for each region, and was also eyeing the potential of affluent Gulf markets such as Saudi Arabia and the UAE. The ministry’s proposed budget for FY 2017/18 is TSh148.6bn ($67.6m), of which TSh96.8bn ($44m) is due to be allocated to operational expenditure, and some TSh51.8bn ($23.6m) to development projects.
Bodies in Charge
The tourism sector is overseen by the MNRT, under which there is a tourism division. The division has responsibility over policy, planning, research, human resources, training, statistics, licensing and quality control, giving it a broad remit and important powers to legislate and regulate. It also appraises proposals from investors, mobilises government resources for tourism development, and has responsibility for international cooperation, making it the first port of call for investors and international partners.
The division has three sections, each headed by an assistant minister. The first, tourism development, oversees broad policy and international cooperation, and identifies attractions and opportunities for diversification. It is also responsible for promoting domestic tourism. The research, training and statistics section is tasked with human resource planning and development, managing information systems, research and training, as well as monitoring and evaluating sector performance. Lastly, the licensing and control section licenses and monitors tourism agents and agencies under the Tourism Act of 2008, which replaced the Tourist Agents (Licensing) Act of 1969 and Hotels Act of 1963. Other agencies involved in the sector under the aegis of the MNRT include TANAPA, the NCAA, the Wildlife Division and the Division of Antiquities, which has responsibility for preserving Tanzania’s cultural heritage.
A key partner for the private sector is the Tanzania Tourist Board (TTB), an agency of the MNRT established in 1962 with responsibility for promoting and developing tourism. “The TTB is an effective body that provides a lot of information,” Haninder Sachdeva, former general manager of the Golden Tulip Hotel Coco Beach, in Dar es Salaam, told OBG. “They are doing real projects, and have a useful database that we can use for planning and forecasting, which is crucial for us.”
Improving Oversight
A report on the sector published in 2016 by the Ministry of Industry, Trade and Investment (MIT) under the World Bank’s diagnostic trade integration study programme suggests policy control is fragmented, with each agency and sector being “siloed” and protective of its mandate, making interaction and coordination difficult. Furthermore, the bodies are not always supportive of the private sector, according to the MIT report. As a result, regulations can be inconsistently applied, and policy-making and implementation is not as efficient as it could be.
Private sector figures also have mixed views about successive governments’ policies towards the tourism sector. Despite its natural strengths as a destination, and the fact that Kenya and Uganda do not receive significantly more visitors, there is a perception that Tanzania’s neighbours have better-developed marketing and tourist infrastructure, as well as more backing from their governments. Tourism development has lagged behind Kenya’s somewhat because Kenya’s economic liberalisation started earlier than Tanzania’s, drawing private investment into the tourism sector, including from a substantial pool of well-off residents.
At the same time, there is a sense that the sector has become a victim of its own success, being an attractive target for tax increases in the state’s fiscal consolidation programme. In July 2016 the government lifted a value-added tax (VAT) exemption on tourism activities, obliging operators to levy a 18% surcharge on services. Domestic and foreign tour operators have decried this rise, saying that it has had an immediate impact on the sector. The Tanzania Association of Tour Operators estimated that the higher prices had resulted in at least 8000 visitor cancellations and $660,000 in lost revenue within weeks of being imposed. Meanwhile, the European Travel Agents’ and Tour Operators’ Associations, which represents 70,000 travel agents and tour operators in 30 European countries, threatened to rebook customers to other countries in the region unless the government repealed the tax.
While the worst-case scenarios have not played out, the sector has taken a hit, with demand dampened by the hike in costs that have been passed on to hotel and tour prices. “Additional taxes have led to a significant increase in costs compared to Tanzania’s competitors,” Sachdeva told OBG. “For example, the Maasai Mara in Kenya is now almost 25% cheaper than the Serengeti.”
Nevertheless, there are signs that the government’s approach will become more proactive as it draws up its new tourism strategy and looks to include elements of the MIT’s study. More support would add momentum to the work already being done by the likes of the TTB and many in the private sector. “This is a big country, with a lot to offer, from beaches to national parks,” said Edmunds. “If the government actively promotes and supports tourism, Tanzania is potentially very exciting.” He added that there were clear positive signs, including progress being made in infrastructure development, with newly tarred roads, airport expansions and the government’s revival of Air Tanzania all having a potentially positive knock-on effect for the tourism sector.
Main Attractions
Along with the island of Zanzibar, Tanzania’s national parks and game reserves are considered its greatest tourism asset, and are important revenue earners for the government. These protected areas are vast – 233,300 sq km, or 28% of Tanzania’s territory – and include 16 national parks, 38 game reserves, 17 game controlled areas and the Ngorongoro Conservation Area. Among the most famous are the Serengeti National Park, where the world’s largest terrestrial mammal migration takes place, and Kilimanjaro National Park, home to Africa’s highest mountain.
According to a number of tourism actors including Edmunds and Nadine Atallah, director of operations at Dar es Salaam’s Sea Cliff Hotel, there is particular potential in further opening up the relatively untouched Selous National Park in the south of the country to tourism, with infrastructure investment a particularly important aspect of development.
Kilimanjaro, the Ngorongoro, the Selous and Serengeti National Park are among Tanzania’s seven UNESCO World Heritage sites, the others being cultural attractions: Zanzibar Stone Town, the rock paintings of Kondoa and the ruins of Kilwa Kisiwani.
Promotion
Tanzania’s international tourism promotion continues to evolve. In 2012 the TTB launched a new marketing strategy using online tourism portals and other digital tools, as well as “goodwill ambassadors” – prominent figures who promote Tanzania. There are now five Tanzanian goodwill ambassadors in the US, one in Australia, and one in China. They include former American football player Patrick Steenberge and Macon Dunnagan, a regular climber of Kilimanjaro who has written a book about the mountain.
The board has also divided countries into primary and secondary markets to better focus resources, with the intention of opening new tourism offices where possible. It is now gearing up tourism roadshows in promising emerging markets, including the BRICS countries and the UAE. The board is working to secure funds to boost its online marketing and social media advertising, shifting its resources gradually towards more digital forms. But it is maintaining television advertising, with a campaign expected to run on major channels including CNN, BBC and ABC News from July 2017 to June 2018.
Visitor Markets
In 2014, the last year for which a full breakdown of arrivals was available, Tanzania’s biggest tourism market was Kenya with 188,214 arrivals, followed by the US, with 80,489, the UK (59,279), Burundi (51,553), Rwanda (50,038), Italy (49,518), Germany (47,262), Zambia (36,679), Zimbabwe (36,497), Uganda (36,420) and France (33,585). Arrivals from growing markets such as India and China reached 27,327 and 21,246, respectively. The figures from neighbouring countries are likely influenced by shuttle traders and others who regularly cross the border, but many of these make a contribution to tourism spending through hotels, catering outlets and transport.
The growth of Chinese visitors is mainly being driven by business tourism, with major Chinese companies such as technology company Huawei and Chinese vehicle exporters being among those expanding in Tanzania. The Chinese leisure tourism market has proved harder to crack, with only a few operators focusing on it strongly. Working with Chinese groups often entails ensuring that Chinese cuisine and Chinese-speaking staff are available, a challenge for smaller providers, and not all hotels have the capacity for the large bookings made by many Chinese travel agents.
The domestic travel segment is also often overlooked, but accounts for 27.6% of the sector’s direct contribution to GDP, according to the WTTC. The organisation expects domestic tourism to grow by an annual average of 6.7% until 2027, rising by 8.4% in 2017 alone.
Regional Market
While attention has focused on foreign tourists from Europe and North America – and now Asia – African visitors are a large part of the market. In 2015 there were 531,000 arrivals from elsewhere on the continent, compared to 367,900 from Europe. Major markets include neighbouring Kenya, Zambia and the Great Lakes countries – comprising Burundi, the Democratic Republic of the Congo, Kenya, Rwanda, Tanzania and Uganda – as well as South Africa, which has a substantial holidaymaking middle class.
Visitor numbers from other African countries have grown strongly in recent years. Traveller numbers from East Africa as a whole rose by 50.5% between 2009 and 2014, to 458,695 – 40% of all arrivals that year. Arrivals from Burundi grew by 252% to 51,553, from Rwanda by 250% to 50,038, and from Uganda by a more modest 11% to 36,420. While Kenya remains a major visitor market for Tanzania, expansion between 2009 and 2014 was slower, at 5.8%. Intra-regional travel more broadly has been boosted by a visa-free regime established by Kenya, Rwanda and Uganda, but Tanzania has decided to opt out for the time being.
The MIT report asserts that while most intra-regional tourists are visiting their family and friends, other EAC member states are creating policies to encourage visitors from elsewhere in East Africa, a strategy that Tanzania would also benefit from.
Branding
The MIT also argues that the region would benefit from a more coordinated tourism promotion policy, marketing East Africa as a single tourist destination on global markets and encouraging travellers to visit several places. The EAC Treaty already enshrines a commitment to developing a regional tourism promotion strategy, and a degree of coordination already happens thanks to the East African Tourism and Wildlife Coordination Agency, set up in 2006, which has promoted East Africa as a single tourist destination at international fairs. However, broader efforts to brand the region as a single but varied destination are in their infancy. Shaking off years of rather isolationist policy has proved difficult. Each country is still keen to attract its own tourists, and increase the length of average stay, rather than share the market with competitors. Indeed, in January 2017 Devota Mdachi, managing director of TTB, told local media that joining the EAC joint tourism market was not at the top of the agenda, given that it is focusing on making the most of Tanzania’s existing potential, and better marketing its attractions.
Nonetheless, demand from tourists is already driving a degree of integration – sometimes to Tanzania’s benefit. Edmunds told OBG that increasing numbers of tourists combine a trip to Tanzania with a few days in Rwanda, particularly to see the latter’s famous gorillas. However, a significant number of visitors to Tanzania make a short trip from Kenya to climb Mount Kilimanjaro, just over the border. Edmunds added that while tourists flock to the Maasai Mara in Kenya, the far more extensive Serengeti National Park on the other side of the border in Tanzania gets fewer visitors.
Human Resources
With the sector growing rapidly and expected to create more than 250,000 new jobs over the next decade, the need for trained workers is increasingly pressing. Finding and retaining skilled staff is a major challenge for many tourism operators, and many managerial positions are currently taken by Kenyans, as Kenya has a more robust system of hospitality training and a larger pool of experienced professionals. Tanzania’s National College of Tourism, an institution under the MNRT, is developing, but both public and private sector institutions are lagging behind somewhat in providing the skills that the market needs, particularly soft skills, while ambitious young Tanzanians gravitate towards other industries – or jobs abroad.
“Human resources is certainly a challenge, and Tanzania lags behind Kenya,” Edmunds said. “Language skills are in short supply. The government is tightening regulations on employing Kenyans, but there also needs to be a vision for developing local talent.”
Coastal Aviation is one example of a private sector company that has made inroads in increasing the proportion of its workforce from Tanzania. The firm employs 20 local pilots, up from six just two years ago. But not all employers have the capacity to do the same.
Business Travel
Business tourism is a relatively small part of the sector, accounting for just 14.5% of tourism and travel spending, or TSh1.09trn ($495.8m), in 2016, according to the WTTC. However, it is growing rapidly, with the WTTC forecasting expansion of 9% in 2017 and an annual average of 7.9% in the 2017-27 period. Business travel has traditionally proved a more resilient market than leisure tourism. This may be due to the fact that many regional visitors travel to meet friends and family, or travel for business, while the leisure segment is more reliant on the international market. However, the country’s current sluggish growth and tighter tax and regulatory environment have put something of a squeeze on the segment, with local and international companies scaling back investment.
Nonetheless, the government’s infrastructure development drive has helped sustain some momentum, with business coming from the likes of the Turkish-Portuguese consortium building the Dar es Salaam-Morogoro railway, which provides solid business for hotels. Tourism operators also hope that once the government’s well-regarded budget consolidation and anti-corruption drives have made good headway, there will be more policy space for attracting investment and improving the business environment.
New Policy
As of August 2017 the government was in the process of drawing up a new National Tourism Policy to update the existing strategy, which was published in 1999. While the policy is widely considered to be sound, the changes in the global tourism sector since its publication in 1999 make updating it a priority. One of the challenges the new document will seek to address is the fragmented nature of the oversight of the sector between different parts of the MNRT.
In August 2017 Aloyce Nzuki, acting permanent secretary of the MNRT, told a meeting of sector stakeholders that in drafting the new policy the ministry would place an emphasis on diversification. Segments on which the ministry is considering focusing on include ecotourism; meetings, incentives, conferences and events; historical and cultural tourism; and beach tourism, while it is also considering means of strengthening the local tourism supply chain.
The government is also contemplating investing in building new hotels to increase supply, and tendering management to international chains, with the further aim of ensuring that money invested in the tourism sector stays inside the country. The review of the policy is being undertaken with the help of the Economic and Social Research Foundation, an independent government think-tank, and supported by the World Bank.
Outlook
Tanzania’s tourism sector is growing strongly again after a spell of being affected by external headwinds. Private investment in hotels and resorts is driving growth, while government infrastructure investment is opening up new areas of the country to tourism. The industry still faces challenges, including the imposition of VAT and the effects of austerity on business demand. But the new sector strategy being drawn up by the government should provide new momentum, and a framework that allows new markets to be tapped.
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